Warren Avenson was a 26-year-old Northwest Airlines pilot the first time he saw Tokyo.
It was June 1947, one month before Northwest’s inaugural commercial flight to the city, and nearly two years after U.S. planes had leveled the city with fire bombs. The still-desolate landscape made Avenson wonder how Tokyo or Japan could be important to the fortunes of his employer.
“There was nothing to indicate that Tokyo had ever been a big city,” Avenson said. “And there was no Japanese economy, nothing.”
Fifty years later, Japan is one of the most lucrative air markets in the world and an essential geographic jumping-off point to the even faster-growing economies of other Pacific Rim countries such as China, Malaysia and Singapore.
No U.S. carrier has been better positioned to take advantage of those markets than Northwest, which flies 140 flights weekly from the U.S. to Japan, and 59 flights weekly from Japan to other Asian countries.
Northwest carries more passengers to Japan from the U.S. than any other carrier, including Japan Air Lines; about one out of every 10 passengers who depart Japan by air travel on Northwest.
“Northwest runs a true hub in Tokyo,” said Scott Gibson, a former airline executive and a visiting fellow at the Economic Strategy Institute, a Washington D.C.-based think tank that studies trade and economic issues. “It really is designed to capture a lot of traffic from points in the U.S. and send it along to other points in Asia.”
As Northwest celebrates the 50th anniversary of its service to Japan, however, its fortress-like presence there is under attack from other North American carriers, who want greater access to Japan, and from the Japanese government, which wants to limit the rights of carriers like Northwest to carry passengers from Japan to other Asian-Pacific markets.
The U.S. and Japan have agreed to negotiate a new air agreement. The official U.S. position calls for “open skies,” or unrestricted air travel between the two countries. The Japanese want an interim agreement that gives their carriers more access to the U.S. but protects those same carriers from being overrun in Japan and beyond.
According to the International Civil Aviation Organization, U.S. carriers had an average operating expense of 17 cents per mile in 1993, and Japanese carriers averaged 59 cents.
Northwest supports open skies but, barring that, has called for enforcement of the existing air agreement. Any interim deal, said chief executive John Dasburg, is unacceptable unless it includes a date by which open skies takes effect.
“It’s my position that we shouldn’t even be negotiating with the Japanese,” Dasburg said. “It’s a sign of weakness. They are in violation of the agreement, and we should impose sanctions.”
Air travel is just one of a host of trade issues between the two countries, however, and Northwest is the only airline sticking to an all-or-nothing position.
Many analysts think it’s likely that other U.S. carriers will obtain more landing rights in Japan, in exchange for granting Japan’s airlines more passenger and cargo landings in the U.S.
Northwest’s worst-case scenario is that the U.S. government agrees to some limits on the carrier’s rights to fly to other Asian countries from Japan.
“There is a great deal of momentum from everyone but Northwest to get an interim deal,” Gibson said.
Northwest owes its position in Japan to the 1952 Air Services Agreement, which granted the right to fly between the two countries to Japan Air Lines, Northwest and Pan Am (Pan Am sold its rights to United Airlines in 1986 for $750 million).
Northwest and United also obtained “beyond” or “fifth freedom” privileges, the right to carry passengers from Japan to other Asian markets.
The agreement, negotiated not long after Japan had passed from American control and while the country still depended on U.S. economic support, is a sore spot with the Japanese.
Dasburg contends, however, that the Japanese didn’t complain about the pact until the mid-1980s, when U.S. airlines began carrying more than half of the passengers to and from Japan. “This is a classic tactic by the Japanese, to come up with a P.R. argument that erodes U.S. success,” he said.
Northwest, after almost selling its Pacific routes to Pan Am in 1954, has defended its position aggressively over the years because of Japan’s strategic importance.
In a recent research report, Banker’s Trust analyst Vivian Lee wrote that though the Japanese economy and some strategic miscues have dented Northwest’s operating income in recent years, its Pacific routes represent “the greatest systemwide upside opportunity” as business traffic to the region increases and the Japanese economy improves.
Travelers to Japan and other points in Asia are predominantly high-fare-paying business travelers. United carries more business traffic to Japan than Northwest, but Northwest’s extensive landing slots in Tokyo and Osaka will become increasingly important as commercial traffic beyond Japan grows.
Fares to destinations such as Bangkok and Singapore, which are beyond the nonstop range for a 747-400 departing from Los Angeles or Chicago, are among the most profitable, according to the Economic Strategy Institute.
“Japan, as both a business traveler origination, destination and stopover, is huge,” Gibson said.
Understandably, other North American carriers want to share in that market.
Though the 1952 agreement has been modified, no other U.S. carrier has beyond rights and few have the number of landing privileges they would like. American Airlines has 21 weekly flights to Japan but only seven from its Dallas-Ft. Worth hub.
American and TWA have stated publicly that they are more interested in increasing flights to Japan than in obtaining beyond rights. In recent weeks they’ve been joined by United Airlines.
Northwest’s position has strained the 50-year relationship between the carrier and the Japanese government. In March, Japanese officials accused Northwest and other U.S. carriers of cutting corners in maintenance.
Northwest said the incidents were minor and accused the Japanese government of trying to hurt Northwest’s business by spreading rumors.
